First-time buyers could be helped by council's £2m mortgage scheme
DOZENS of first-time buyers who fall behind with their mortgage payments are to be bailed out by Derbyshire County Council.
The Tory-led authority has agreed to guarantee Lloyds TSB up to £30,000 of missed transactions per mortgage, in a bid to encourage the bank to lend to those wishing to get on the property ladder.
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John Harrison
Cabinet members voted yesterday to give the bank £2 million across two Local Authority Mortgage Schemes – enough to bail out 66 homeowners who default on their mortgage.
The mortgagee would then owe the council the missed payments.
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Under the terms of the scheme, Lloyds will return the council's £2 million investment in 2018, with 4% interest – generating £80,000 for the authority.
Councillor John Harrison, cabinet member for finance and management, said it was "undoubtedly a good news story" – but admitted he wished more first-time buyers could be helped.
He said: "Of course we wish it was more but Lloyds TSB has set a limit investment from councils of £2 million.
"That decision rests with them."
Mr Harrison said the council will contribute £1.75 million to its own Local Authority Mortgage Scheme and £250,000 to a similar one run by Chesterfield Borough Council.
Those buying existing properties valued at under £150,000 will be eligible for the schemes once they are launched.
A report to the cabinet said further schemes could be set up in the future to enable more first-time buyers to benefit, although Mr Harrison said it was unlikely they would be with Lloyds as the bank is reluctant to run numerous schemes across the same county.
Raising a deposit is one of the biggest hurdles for first-time buyers since the 2008 banking crisis, with many lenders refusing mortgages to people whose savings are less than 20% of the value of the property they want.
The need for a big deposit combined with high house prices and higher rates of unemployment among younger people has combined to push down the number of first-time buyers.
Mr Harrison said it was therefore important that the council played its role in stimulating the housing market in Derbyshire.
Councillor Anne Western, leader of the Labour opposition at Derbyshire County Council, said that, although it was a "good scheme", it was not enough.
She said: "It is a drop in the ocean and doesn't address the needs of young people in Derbyshire.
"We ought to be doing more across the board and looking at how we can stimulate more house building."
4 Comments
by JonBoyWalton
Tuesday, February 12 2013, 4:03PM
“£80,000 return on £2,000,000 over 5 years is a return of about 0.8%. What an excellent return that is. To describe that as an investment is shocking.”
by make_redgreen
Tuesday, February 12 2013, 2:47PM
“It's the arrears recovery!!”
by mark_sinfin
Tuesday, February 12 2013, 2:33PM
“schemes like this keep the house prices artifically high meaning people cant afford to buy them, until prices start to go down then people wont be able to truely afford to buy houses without the help of dead grannys etc. and if all houses go down then when you move it wont matter you dont get as much as the other house you move to will be chaeaper.”
by janine2011
Tuesday, February 12 2013, 12:49PM
“Bet the council tax payers in Derbyshire will be really happy their hardearned cash is paying for other people's mortgage arrears, especially if they are already struggling to make their own mortgage payments and pay their council tax”